Insurance agents: should you claim the 25% fixed ratio or actual expenses?

Since Year of Assessment 2020, qualifying commission agents can claim a deemed expense of 25% of their gross commission instead of adding up actual expenses. It saves record-keeping, but it is not always the better deal, and not every agent qualifies.

Who qualifies for the 25% ratio?

You must meet all three conditions: you carry on a trade, business or profession; you incurred allowable business expenses in earning the commission; and your total annual gross income from all sources does not exceed S$50,000. That total includes commission, referral fees, training fees, allowances and incentives.

What happens above S$50,000?

If your total gross income is more than S$50,000, you must claim actual allowable business expenses. IRAS’s own example: an agent earning S$15,000 as an insurance agent and S$40,000 as a property agent has S$55,000 in total, so the 25% ratio is not available for either.

Can I mix the two methods?

No. If you earn commission from more than one source in a year, you must use the same method for all of it: either 25% on everything or actual expenses on everything.

What does the 25% cover?

It is deemed to be all your allowable expenses for that commission, including entertainment, public transport, gifts and telecommunications. You cannot claim those on top.

When do actual expenses come out ahead?

When your real allowable spend is more than a quarter of your commission. An agent earning S$40,000 who spends S$13,000 on client meals, gifts, roadshows and phone gets a S$10,000 deduction under the ratio, but S$13,000 with actual expenses. The catch: every claim needs its receipt and business purpose, kept for 5 years.

How do I decide each year?

Keep every receipt through the year anyway. At filing time, compare your total allowable expenses with 25% of your gross commission, check you are under S$50,000 in total income, and use the larger figure you are entitled to.